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The impact of modern capital on skill allocation in the European Labour Market

Written by Ejoel Metz

Paper category

Bachelor Thesis


Business Administration>Marketing & Sales




Bachelor Thesis: The current state of technology Recently, Eurofound (2018) introduced readers to current technology and its main impact on the production process. Here are three technologies that determine the perception of this article: 1. New advances in advanced industrial robots (AIR) sensors and dynamic programming allow the use of robots that can perform tasks that require flexibility and accuracy. It was impractical 15 years ago (Autor et al., 2003), and it turned out to have a new impact on the already affected labor market, because unconventional manual tasks seem to have a higher automation risk than before. 2. The concept of additive manufacturing (AM) aims to add products and their components to new products, not to cut existing materials. AM requires machines to be able to digitally model products before they are physically produced. The ability to turn data into things (and vice versa) enables a new step in technological advancement (Gershenfeld, 2012). Therefore, if the machine can conceptualize and execute the product, abstract or manual-intensive tasks may face automation risks to a certain extent. 3. Independent construction. Industrial Internet of Things (IIoT) Thanks to the Industrial Internet of Things, cyber-physical systems implemented in the production chain can communicate with each other, making the production process autonomous. Therefore, any manual labor previously used to accompany the production steps is at risk. Estimates of possible global market outcomes illustrate the potential universality of these technologies. According to the white paper RAS 2020 (2014), by 2025, the annual transaction volume of AIR is estimated to be between 1.61 and 5.42 trillion. Regarding AM, the global turnover may reach 423 billion (Manyika et al., 2013), while Berger (2013) estimates that the industry represents 1.44 billion. Finally, Eurofound (2018) suggested that by 2025, IIoT can only represent 17 billion and 626 billion euros in the automation industry. However, when discussing the impact of these advancements, the following adoption barriers should be considered (Eurofound, 2018): Initial investment: Technology, such as AIR, requires initial investment. As a result, the number of companies that can integrate AIR into their production processes has decreased because these initial investments require large amounts of financial and non-financial capital. On the other hand, IIoT and AM do not require high investment capabilities, but the full implementation of the entire production process requires a lot of participation. Energy and raw materials: Although these technologies may have some differences in investment, all of them require a lot of energy. By 2050, global electricity demand will be twice what it is today (World Economic Forum, 2017). 3 Methodological framework and results 3.1 Data and variables To answer the research questions, we use data retrieved from Eurostat (2018a,b,c), the statistical agency of the European Union. Eurostat (2018a) is based on the 2010 European System of Accounts (ESA 2010) and can compare the national accounts of different countries. This source is used to generate the variables capital and Degree of open, which will be explained in the article later. Eurostat (2018b) focuses on variable higher education and is the actual implementation of the International Standard Classification of Education. Finally, Eurostat (2018c) allows access to the results of the EU Labour Force Survey. This is the source of the dependent variable implemented in the statistical model that will be explained later in this article. We consider dividing the years from 1996 to 2016 (20 years) into five four-year periods because this article attempts to investigate recent changes in skill allocation caused by “modern” capital. We have information on all current EU member states, except Croatia, because this country lacks some variables on the right. Therefore, we should have foreach variable 5 27 = 135 observations. However, the panel data is unbalanced. The reason is that many countries joined the European Union in 2000, which means that Eurostat does not know the information of some countries before 2000. As explained in the literature review, the emergence of “modern” capital is driven by two factors: 1. The price fall of computers and related capital (Frey and Osborne, 2013; Autoret al., 2003) 2. Computers are becoming more and more efficient in certain tasks (such as daily tasks) (Eurofound, 2018; Schwab, 2017). The literature proposes two main phenomena induced by capital: Substitution: When work is concentrated on tasks that the computer can perform , Work is in danger of computerization (Frey and Osborne, 2013), because the former has a comparative advantage over manpower through higher productivity and lower prices of computers. Then provide manpower for these tasks. This is because workers can focus on these tasks. One side effect is that workers will increase the productivity of these tasks. The independent variable of interest is capital, which should act as an agent for new technological advancement and innovation that is easy to replace and/or supply manpower described in the theoretical framework. Therefore, I suggest limiting the term capital to the following parts that I aggregate together: ICTXII equipment, computer hardware, telecommunications equipment, transportation equipment, intellectual property products, research and development, computer software and databases Read Less